Report - CPSIA + 5 Years

Introduction

During the Christmas buying season of 2007, Mattel Inc., RC2 Corp., and Marvel Toys (now defunct) were found to be selling toys with dangerously high lead content and toys with unsafe small parts. The Consumer Product Safety Commission (CPSC) properly identified these hazards and recalls were issued for millions of toys. These recalls scared consumers and the ruckus prompted congress to act, passing the Consumer Product Safety Improvement Act (CPSIA) in August of 2008.

The CPSIA created new regulations for the manufacture and sale of all children’s products. Among other things it includes: limits on heavy metals and phthalates, conformance to the ASTM toy safety standard, certification, labeling requirements, and mandates for third-party testing. These requirements caused considerable burdens for small and low volume toy manufacturers and importers based in the U.S. and Europe. These burdens threatened their very existence and they became known as the “unintended consequences” of the CPSIA.

The Handmade Toy Alliance (HTA) was formed in November of 2008 as an ad hoc group of small businesses that were adversely affected by the CPSIA. A true grassroots effort, the HTA board of directors has always been comprised of owners of small businesses and low volume toy and children’s products manufacturers. The HTA has never had offices, staff, or legal representation, but has operated on the efforts of its volunteer board of directors and with the assistance of our vast and growing membership.

Today we are an alliance of nearly 800 small-batch toy makers, children’s product manufacturers, specialty importers, and independent retailers from across the United States and Europe. We specialize in high quality, inspiring, and safe goods for children. The Handmade Toy Alliance seeks to:

• lend a voice to specialty toy stores, small batch toy makers and children's product manufacturers;
• assist in raising awareness of the issues that directly impact HTA members;
• preserve access to unique handmade and small batch toys, clothes, and other children's products;
• support and promote HTA members.

We continue to be considerably affected by the CPSIA, its amendment, and the subsequent rulings of the CPSC. Despite efforts by Congress to alleviate unnecessary burdens, the pathway to compliance continues to be littered with obstacles.

The Early Years

During 2009, 2010, and seven months of 2011, the HTA engaged with the political process in Washington DC to find solutions and remedies for the unintended consequences that were threatening all of us. It was a frustrating, complicated, and time consuming process to attempt to right a wrong that encumbered us through no fault of our own.

Four of our board members were invited to testify or provide input on the issues that negatively affected our membership. Twice we were represented by stay-at-home moms producing children’s products in home studios and twice by owners of small specialty toy stores. We appeared first before the House Commerce Committee in April of 2010, and again in February and April of 2011. Our testimony before the Senate Commerce Committee was in December of 2010. Our plight was described and published in national newspapers and we became the mouthpiece for small and micro businesses in the U.S. who earned their living making, selling, or importing children’s products in low volumes.

Working bills came and went but relief always seemed to be just out of grasp. Throughout the process, member businesses lost the fight to survive because relief from the burdens of the CPSIA was not forthcoming.

Public Law 112-28

On August 1^st, 2011, the confluence of three events caused movement of a bill to fix the CPSIA– H.R.2715.

    1.      The retroactive 100 ppm lead limit approved by the CPSC two weeks earlier, 
    2.      The need to increase the U.S. debt ceiling to avoid a default a day later,  
    3.      and Congress’ desire to start August recess.

H.R.2715 was created, passed through the House under suspension of rules and then through the Senate by unanimous consent because the collision of these circumstances created a necessity to move quickly without the usual due process. We were told that H.R.2715 is like a speeding freight train and there’s no way to change it or stop it, just watch it go past. The previous two and a half years of lobbying and advocating were to be encapsulated and condensed into language we had not seen nor could comment on.

H.R.2715 became Public Law 112-28 later in August of 2011 and has two provisions relating to small business that are a result of our efforts. They are, in Section 2 APPLICATION OF THIRD PARTY TESTING REQUIREMENTS, special provisions for small batch manufacturers and also requirements for exploring and implementing burden reduction from third party test. PL 112-28 is not the legislative fix HTA desired, but instead placed the fate of all of our businesses in the hands of the CPSC by allowing the Commission to rule for relief and burden reduction.

Small batch provisions

The first relevant language appears in section 14(d)(4) of the Consumer Product Safety Act (CPSA) as amended by PL 112-28 under SPECIAL RULES FOR SMALL BATCH MANUFACTURERS:

“(A) SPECIAL CONSIDERATION; EXEMPTION.-

(i) CONSIDERATION; ALTERNATIVE REQUIREMENTS.—Subject to subparagraph (C), in implementing third party testing requirements under this section, the Commission shall take into consideration any economic, administrative, or other limits on the ability of small batch manufacturers to comply with such requirements and shall, after notice and a hearing, provide alternative testing requirements for covered products manufactured by small batch manufacturers in lieu of those required under subsection (a) or (b). Any such alternative requirements shall provide for reasonable methods to assure compliance with any applicable consumer product safety rule, ban, standard, or regulation. The Commission may allow such alternative testing requirements for small batch manufacturers with respect to a specific product or product class or with respect to a specific safety rule, ban, standard, or regulation, or portion thereof.

(ii) EXEMPTION.—If the Commission determines that no alternative testing requirement is available or economically practicable, it shall exempt small batch manufacturers from third party testing requirements under subsections (a) and (b).

(iii) CERTIFICATION.—In lieu of or as part of any alternative testing requirements provided under clause (i), the Commission may allow certification of a product to an applicable consumer product safety rule, ban, standard, or regulation, or portion thereof, based on documentation that the product complies with another national or international governmental standard or safety requirement that the Commission determines is the same or more stringent than the consumer product safety rule, ban, standard, or regulation, or portion thereof. Any such certification shall only be allowed to the extent of the equivalency with a consumer product safety rule, ban, standard, or regulation and not to any other part of the consumer product safety rule, ban, standard, or regulation.

(B) REGISTRATION.—Any small batch manufacturer that utilizes alternative requirements or an exemption under this paragraph shall register with the Commission prior to using such alternative requirements or exemptions pursuant to any guidelines issued by the Commission to carry out this requirement.

(C) LIMITATION.— [Excludes certain classes of products from alternative requirements and exemptions like durable infant and toddler products.]

(D) SUBSEQUENT MANUFACTURER.— [Excludes subsequent manufacturers further down a supply chain.]

(E) DEFINITIONS.— For purposes of this paragraph—

(i) the term ‘covered product’ means a consumer product manufactured by a small batch manufacturer where no more than 7,500 units of the same product were manufactured in the previous calendar year; and
(ii) the term ‘small batch manufacturer’ means a manufacturer that had no more than $1,000,000 in total gross revenue from sales of all consumer products in the previous calendar year. The dollar amount contained in this paragraph shall be adjusted annually by the percentage increase in the Consumer Price Index for all urban consumers published by the Department of Labor.

For purposes of determining the total gross revenue for all sales of all consumer products of a manufacturer under this subparagraph, such total gross revenue shall be considered to include all gross revenue from all sales of all consumer products of each entity that controls, is controlled by, or is under common control with such manufacturer. The Commission shall take steps to ensure that all relevant business affiliations are considered in determining whether or not a manufacturer meets this definition.

Application for domestic manufacturers

The CPSC never identified any “alternative requirements” as indicated in subsection (i) therefore allowing the exemption identified in subsection (ii). This provides an exemption from some third party testing for small batch manufacturers but not an exemption from compliance, labeling, or certification. Specifically, third party test must be performed for: lead in paint and other surface coatings, small parts when a product is age graded for children under three, metal jewelry, and durable infant or toddler products.

It is important to note that small batch manufacturers must still comply with all applicable safety rules and certify that their products meet the requirements. For those third party tests that are exempted, a small batch manufacturer must issue a general certificate of conformity based on first party testing, a reasonable testing program or a certificate of conformity provided by a component part supplier.

In addition, as subsection (B) indicates, a business desiring to utilize the exemption must register with the CPSC. Parts of the registration are publicly available including: the business name (often the owners name for sole proprietors), city, and state.

Application for small batch importers

The CPSC treats small batch importers as the manufacturer of record so that the same requirements that apply to domestic producers apply to the importer. A possibility for relief appears in subsection (iii) indicating the CPSC may accept compliance with an international standard as an alternative test when it is determined to be “the same or more stringent” than what is required by the CPSA. Unfortunately, international toy standard harmonization is far from a reality so that the law describes a relief method that will likely never exist.

In addition, the CPSC has added a requirement to the law so that the small batch revenue and volume requirements apply to both the foreign manufacturer and the U.S. based importer. In most cases, an HTA member small business importer brings products from second tier manufacturers in Europe to the U.S. for retail in specialty toy stores. The European manufacturer produces in low volumes and can meet the volume requirement but the revenue cap excludes them.

Thus HTA members who are importers or who operate specialty toy stores continue to be negatively affected by the trade barrier raised by the CPSIA between the E.U. and the U.S.

Reducing third party testing burdens

The second relevant language appears in section 14(d)(3) of the Consumer Product Safety Act  as amended by PL 112-28 under REDUCING THIRD PARTY TESTING BURDENS:

“(A) ASSESSMENT.— Not later than 60 days after the date of enactment of this paragraph, the Commission shall seek public comment on opportunities to reduce the cost of third party testing requirements consistent with assuring compliance with any applicable consumer product safety rule, ban, standard, or regulation. The request for public comment shall include the following:

[…]

(v) The extent to which evidence of conformity with other national or inter- national governmental standards may provide assurance of conformity to consumer product safety rules, bans, standards, or regulations applicable under this Act.

[…]

(vii) Other techniques for lowering the cost of third party testing consistent with assuring compliance with the applicable consumer product safety rules, bans, standards, and regulations.

(B) REGULATIONS.—Following the public comment period described in subparagraph (A), but not later than 1 year after the date of enactment of this paragraph, the Commission shall review the public comments and may prescribe new or revised third party testing regulations if it determines that such regulations will reduce third party testing costs consistent with assuring compliance with the applicable consumer product safety rules, bans, standards, and regulations.

(C) REPORT.—If the Commission determines that it lacks authority to implement an opportunity for reducing the costs of third party testing consistent with assuring compliance with the applicable consumer product safety rules, bans, standards, and regulations, it shall transmit a report to Congress reviewing those opportunities, along with any recommendations for any legislation to permit such implementation.

The CPSC has already requested comments as required and CPSC staff has prepared a document titled Consideration of Opportunities to Reduce Third Party Testing Costs Consistent with Assuring the Compliance of Children’s Products, dated August 29^th, 2012. The Commission voted October 10^th 2012 after a verbal motion stating “that, subject to resources allocated by the commission, and subsequent operating plans to carry out the potential opportunities to reduce third party testing costs, the commission approves the following actions by its staff: these items include efforts related to” and then simply lists 8 of the burden reduction recommendations. On the surface it appeared the Commission was voting to follow the staff recommendations and move burden reduction forward quickly and nearly within the one year timeframe mandated by PL 112-28.

However, with the release of the written motion, we discovered it only directs staff to draft a request for information (RFI) on each of the 8 burden reduction opportunities. Furthermore, the motion states that the burden for demonstrating the validity of the burden reduction method is on the submitter. Now the task of research and proof falls with the stakeholder and not with the CPSC. The HTA member stakeholder has neither the equipment nor the expertise to perform what is required to meet the “burden of proof.”

Subsequently in January of 2013, the commission voted to allocate resources in 2013 for staff to issue the RFIs for just 4 of the 8 opportunities. And then indicated a timetable with the statement “For each RFI, the Commission intends to provide resources in the fiscal year 2014 operating plan, to the extent the agency's safety work permits, to ensure staff reviews the responses and summarizes any recommended course of action on each item for the Commission.” We are lost in another round of comment and left to assume that it will be no earlier than 2015 before review and summary turn into promulgated rules.

Subsection (C) – REPORT, allows for the CPSC to report back to Congress when they lack authority to move forward with burden reduction. And of course it is always possible for the Commission to inform Congress on progress and obstacles stakeholders face. When the HTA personally suggested to the Commission that they report to congress issues continuing to affect small business stakeholders, they explicitly denied the request.

The progress the CPSC is making on these burden reduction opportunities is simply not acceptable. Small business, and all stakeholders, are being held hostage to pointless requirements like performing a solubility test on cotton fabric for barium.

The beneficial methods for reducing testing costs from the CPSC staff document of August 29^th, 2012 are outlined below.

(1) Establish a List of Equivalent Tests to those in CPSC-Administered Children’s Product Safety Rules

The differences in toy safety standards in the U.S. and Europe continue to suppress the supply of small batch toys from Europe to specialty retailers in the U.S. In many cases the differences in regulations are small and in some cases even insignificant. But the small differences create a large economic hurdle for low volume manufacturers that must be cleared by completing multiple tests that are nearly redundant.

Subsequently, the CPSC Commissioners voted to move forward on this issue, but then chose not to fund the effort during the 2013 budget year.

(2) Research the Feasibility of Developing a List of Materials Determined Not to Contain the Eight Heavy Elements Listed in ASTM F963-11

The lead determinations list in 16CFR1500.91 lists raw materials that the CPSC has determined do not contain lead and therefore do not need to be tested. The list is a primary method used by members of the HTA to reduce the cost of compliance. The requirements of ASTM F963-11 with limits placed on concentrations of heavy metals other than lead complicate this pathway to compliance with additional tests that are superfluous.

Since low volume toys often use natural materials, the possible reduction in testing cost is significant. For all manufacturers who use natural materials that already receive a lead exemption, this additional determination is a useful course to pursue while at the same time not compromising safety.

(3) Investigate Adding Manufactured Woods to Lead Determinations List

The determination that wood does not contain lead is often used by low volume manufacturers to reduce the cost of compliance with the CPSIA regulation. “Manufactured woods” or laminated woods are frequently used in children’s products when any dimension of the product increases above 10 cm (like a wooden puzzle) or if the product includes a cavity (such as a shape sorting box or dollhouse.) For larger wooden components, manufactured wood is more stable and thus safer than wide pieces of solid wood, which can crack or splinter over time.

Adding manufactured woods to both the lead determinations list and a new determination list for ASTM F963-11 heavy metals allows low volume manufacturers to resume using this material without the substantial burden of additional testing while at the same time not compromising safety.

(4) Determinations for Phthalate Concentrations

The CPSC, in August of 2012, indicated that these materials do not inherently contain phthalates and so do not require third party testing: untreated/unfinished wood, metal, natural fibers, natural latex, and mineral products. Phthalates are primarily used to soften plastics and on occasion, plastic parts are used in handmade children’s products.

Other raw materials also likely do not contain phthalates and the HTA encourages the CPSC to investigate the potential to expand this list to include:

• paper and paperboard;
• printing inks;
• textiles with manufactured fibers;
• screen printing inks;
• plant and animal derived materials; and
• manufactured wood products.

An expanded list of phthalate determinations reduces the need for unnecessary tests and therefore reduces cost as well. The safety of a product is not compromised.

(5) Investigate CPSC Acceptance of Other Accreditation Bodies to Accredit Testing Laboratories to ISO/IEC 17025:2005

The Handmade Toy Alliance supports any effort to increase the number of testing bodies certified to test for CPSIA compliance - especially where this expands the reach within the E.U. or provides access in countries with limited or no certified labs.

The Commission has not issued a request for information or indicated a desire to move forward with this issue.

(6) Define a Periodic Testing Option Based on Volume of Products Manufactured Rather than Solely on a Time Period

The periodic testing rule sets the testing timeframe based solely on time. The HTA believes there needs to be a periodic test for low volume manufacturers based on quantities rather than time. A low volume manufacturer that performs a third party test can experience an economic savings by performing fewer tests within a fixed period of time.

The current rule overwhelmingly favors large manufacturers at the expense of smaller ones. The amount of risk which accumulates between periodic testing of an unchanging product is directly related to the number of units produced, not to the amount of time which has passed.

Why Small Batch Provisions have Limited Use

For various reasons, the small batch rules are not widely utilized by small business. Survey results from July 2013 indicate approximately one third of HTA members register with the CPSC and take advantage of the small batch exemption. Reasons given for not using the small batch exemption include: the complexity of the requirements, need for compliance and certification, and public registration.

Complexity

The small batch exemption only exempts manufacturers from a subset of required tests. Our members indicate that selecting the tests required for any specific product and the exemptions that apply is an arduous, time consuming process. The resources for making these selections are difficult to find, hard to read, and challenging to interpret. The technical information is equally difficult.

The HTA has asked repeatedly for product specific guidance to simplify the complexity of small batch rules. But after five years, we have consolidated product specific guidance for only a single category of children’s product – doll clothing.

Compliance and certification

Since the small batch exemption does not affect the requirements for compliance and certification, small businesses seek ways to assure themselves their products are safe in the absence of a test. Small batch manufacturers are required to certify their products based on a first party test, a reasonable testing program, or a previous third party test from a component supplier.

In many instances, a first party test is not possible because of the equipment required or the technical understanding needed to perform the test and interpret the results.

A small business owner could develop what they believe is a reasonable testing program, but it is unlikely to meet the CPSC’s strict interpretation of “reasonable testing program.”

Public registration

Because many small and micro businesses are sole proprietorships without a fictions name, there is a reluctance to publicly register as required to claim the small batch exemption. Registration exposes personal information.

The Path of Least Resistance

Just as water flowing downhill finds the path of least resistance, small business also finds the path of least resistance to reach compliance. So instead of the small batch exemption which is plagued with complexity and obstacles, two thirds of our membership depends heavily on burden reduction through the determinations lists, avoidance of problem materials, age grading, and carefully choosing their own route.

Other handmade toy makers have simply gone out of business or chosen to make products that are not designed for children because the CPSIA and subsequent relief efforts preserve a hurdle too high for small business to clear.

Determinations

The determinations list in 16CFR1500.91 identifies many materials that the CPSC has determined do not contain lead and therefore do not need to be tested for lead content. So if a manufacturer uses only materials from this list there is no need for a lead test. This is a simple application of the rules, easy to understand, and an effective means to reach towards compliance and certification.

But there are holes in this path that have opened with the adoption of the ASTM-F963-11 standard. These must be filled by the CPSC and include: determinations for the additional eight heavy elements required by ASTM-F963, determinations on phthalates, and a determination on manufactured woods.

Without the holes filled, some small businesses feel they have little choice but to ignore the requirement to test cotton fabric for barium, or natural solid wood for selenium.

Avoiding problem materials

It’s not a difficult stretch to imagine that if there is a single component of your children’s product that forces you to perform an expensive test, then you should look for an alternative component or simply remove that component from your product.

For instance, if you produce a wooden toy with a surface coating not on the determinations list that requires a test, then removing that coating and substituting bee’s wax avoids the costly test. Similarly, removing a zipper or button from doll clothing can also avoid expensive tests.

Age grading

The testing requirements on children’s products age graded for children under three years are more complex and burdensome. So instead of producing toys for children under three years, HTA members neglect this segment of the population and instead concentrate on products for older children. 

Of course the negatives side effects are fewer unique product choices for consumers and for the business owner, giving up a category with a significant source of revenue.

Choosing their own route

There are certainly instances where small business believes the path of least resistance is to continue doing what they have done for years to assure they produce a safe product: use their experience and wisdom to guide design and manufacture, and form relationships with their customers. Certain risks accompany this approach but the business owner balances the risk and the benefit.

A hybrid example occurs when some portions of the requirements are adhered to and others are ignored because of costs and complexity.

Conclusion

The missteps of a few very large toy companies precipitated regulations which damaged thousands of small and micro U.S. businesses and continues to encumber those that survive. A Congressional directive to remedy regulatory issues failed to solve the problems experienced by HTA members or even clearly direct the CPSC on a definite path of remediation.

Faced with inadequate good options for compliance while maintaining a viable business, the HTA business community out of necessity devised paths of least resistance. They are not attractive, they have negative side effects, and they may not meet the letter of the law; but they are simply paths of least resistance that balance compliance, risk, and business viability.

It is important to note that there continue to be many opportunities where burdens can be reduced and even eliminated without compromising the safety of consumers. These have been identified and discussed within Congress and the CPSC. They include:

• Establish a list of equivalent tests, especially those from the E.U. in EN-71
• Expand lead determinations list to include eight heavy elements from ASTM-F963-11
• Add manufactured woods to the lead determinations list
• Create and expand a determinations list for phthalates
• Accept results from a wider group of testing labs
• Define a low volume periodic testing rule
• Publish a wide variety of product specific guidance

Congress and the CPSC must move forward with meaningful solutions that are funded and given priority.